Accumulated depreciation is considered a contra asset, appearing as a negative balance underneath the asset to which it is assigned in the asset section on the balance sheet. However, accumulated depreciation cannot be considered neither a true asset nor a true liability as it does not meet the qualifications for either category.Continue Reading
Accumulated depreciation cannot be considered an asset, because the balance(s) stored in the account do not represent something that will produce an economic value in the future. Instead, the balance represents an amount of economic value that has already been consumed.
Accumulated depreciation cannot be considered a liability, either, because the balance is not representative of anything owed to a third party. Rather, the accumulated depreciation line on a spreadsheet is for purely internal use and represents nothing of value to a party outside of the organization.Learn more about Accounting
Accumulated depreciation, purchase discounts and purchase returns are examples of contra accounts. Accumulated depreciation is a contra account in the assets portion of the balance sheet. Purchase discounts and returns are contra accounts that debit the cost of goods sold account on the income statement.Full Answer >
To calculate depreciation using the sum of the years' digits, divide the undepreciated useful life of the asset by the sum of the years' digits, and then multiply the result by the depreciable amount. If you know the useful life of the asset, the cost of the asset and its residual value after its useful life, the calculation takes about 10 minutes.Full Answer >
There are three commonly used formulas for depreciation based on time: declining balance method, straight line method and sum-of-the-years'-digits method. The first formula calculates book value multiplied by depreciation rate; the book value equals cost minus accumulated depreciation. To calculate the depreciation rate for a double declining balance, use straight line depreciation rate multiplied by 200 percent. Likewise, for a 150 percent declining balance, use straight line depreciation rate multiplied by 150 percent.Full Answer >
Read a financial statement by examining a company's balance sheet, income, earnings per share and cash flow. Operating, investing and financing activities are also part of a firm's financial statements submitted to the U.S. Securities and Exchange Commission, explains its official website.Full Answer >